A history of success didn’t stop this company from finding new ways to meet customer needs. What do you get when you combine quality products at affordable price points? Rick Dreiling would say you’d get an experience much like the one his company had these past three years. As a chairman and the CEO of retail giant Dollar General, Dreiling saw the company through a time of transition and significant growth. And as the company moves into its 72nd year of business, it’s proving that a little innovation can go a long way.

Profile

Headquarters: Goodlettsville, Tenn.

Founding year: 1939

Number of locations as of January 2011: more than 9,300

2010 net sales: $13.04 billion, compared to $11.80 billion in 2009

“The culture at Dollar General has always been to serve the underserved,” said Dreiling. “The company is built on the principle of every day low prices at convenient locations—we go where the large-box retailers won’t. Couple that with the fact we’re a low-cost operator, and it allows us to build our stores at a reasonable rate while still being there for our customers.”

Dollar General has approximately 9,500 stores across the US and expects to finish out 2011 with 400 more. Its footprint spans 35 states and will spread to another three by the end of the year. The company is home to more than 86,000 employees, and about 55% of its stores are in rural locations.

Dreiling joined the company in 2008 and has led the company through a refocusing of sorts. Kohlberg Kravis Roberts & Co., a private equity firm, acquired Dollar General the year before. Dreiling said although the company didn’t experience a complete turnaround, it did step up its focus on quality, growth, marketing, and cohesiveness.

In fact, in 2008, the company had a same-store sales growth of 9%. In 2009, that number grew to 9.5%, and Dollar General finished 2010 with 4.9% same store sales growth. Last year alone, the company experienced $13 billion in sales, and it will create 15,000 new jobs from 2009 to the end of this year.

“Our average store volume is up more than 25% within three years, and that’s coming from a mature business in a mature channel,” said Dreiling. “Our growth is exciting to me because I consider the channel to be the last wild frontier in consumable retailing. What’s transpired over the past three years is a result of discipline, rigor, category management, and a more consistent store offering. ”

Three simple things

Dreiling said Dollar General’s staying power could be attributed to three things: everyday low prices in convenient locations, employees, and teamwork.

“I can’t stress enough the importance of offering customers low-price items at convenient locations,” he said. “We also have an incredibly strong management team, and we’re fortunate we can easily get everyone moving in the same direction.”

Community involvement has resonated throughout the company since its inception, and Dreiling said employees have a strong focus on helping the communities in which they work.

The recession served as a time of rediscovery for former Dollar General shoppers; Dreiling explained how the economic environment in 2008 drew many people looking for affordable, everyday basics. Consistency in pricing also played a part in remaining competitive during the economic downturn.

“During the recession, people who hadn’t been in our stores in two or three years came in and shopped,” he said. “The economy heightened consumers’ desire to find quality, basic essentials at everyday low prices. At the same time, we improved our merchandise selection and elevated our store standards.”

Keeping consistency

The company’s period of refocusing began in 2008 with creating a more consistent feel throughout its stores. Dreiling said one of the first things he and his team noticed was the eclectic shape and size of the Dollar General’s stores, along with their assorted offerings. Thinking of other major retail chains in the US, Dreiling set out to establish operating priorities designed to execute discipline and consistency.

“We redefined the box at Dollar General,” he said. “Our four operating priorities were to drive productive sales growth, enhance our gross margin, leverage process improvement and information technology to reduce costs, and expand our culture of serving others. Three years later, I still only talk about those four concepts when it comes to the company’s operating plans.”

Dreiling and his team focused on everyday presentations of the stores. To start, they standardized shelf height and increased product offerings—the extra space equaled out to adding almost 600 more stores to the chain. About 25% of each store was flex space, and store managers decided what product went into the space. Now, every Dollar General store’s planograms make it easier for customers to consistently shop from store to store.

Dreiling said that in addition to treasure hunt items, Dollar General’s consumers are interested in national brands, which is why the company developed a new national brand program. Dollar General also redid its private brand program by creating national brand equivalent products and rebranding them to give customers quality products at lower price points.

“We improved the offering and quality of the product while keeping our costs in line,” said Dreiling. “Over time, the company confused cheap with inexpensive. The change in national and private brands came through a relentless focus on category management, which is a science as well as an art. We refined our offering based on what our customers were telling us, and now, although we still sell inexpensive products, we make sure they are the quality our customers deserve.”

To get the word out about its new products, the company depended heavily on word-of-mouth marketing and social media. It doesn’t employ radio or television ads and instead lets its stores do the talking. “Our better store standards speak of what we’ve done,” said Dreiling. “There’s more consistency, and we do a good job of letting the product be the star.”

Looking ahead, Dreiling said the company has strong potential for expansions and that the last three years speak for themselves. The company’s real estate program determined there are 8,000 opportunities for growth in the states Dollar General is already in, along with 4,000 opportunities in the states it’s not.

“It’s a great company, and it’s a financially healthy company,” he said. “It has great employees, and I can honestly say these past three years have been the best three years of my retail career.”